Part 28

For many years, however, a strong feeling in favour of a parcel post system existed, especially among the farmers of the West; and with the establishment of a service in the United States in 1913 it became impossible to withhold a similar service from Canada. The question was discussed in Parliament in January 1913, and, as the immediate adoption of a system was obviously desired, the Government undertook to give the matter fullest consideration, with the view of submitting a scheme at an early date. The matter was really of some urgency since, under an existing Convention, although no internal parcel post service was in operation, Canada was called upon to carry throughout her territory parcels originating in the United States; and in June 1913, when the success of the service in the United States was seen to be assured, a Bill was introduced authorizing the establishment of a parcel post in Canada.

There could be no question of applying a flat rate in a country of such vast territories and scattered population;[731] and the Canadian system, like the American, is based on zones of distance. The limits of the zones correspond with the provincial boundaries. Each province forms a zone, with a flat rate within its borders; a rate as for an additional zone is charged on parcels crossing into an adjoining province; and a rate as for a third zone on parcels crossing an intermediate province to a third province; and so on. The three maritime provinces are grouped together as one zone, and a special local zone rate is given for parcels delivered within 20 miles of the place of posting. This local rate is independent of the provincial boundaries. It is a concession to the storekeepers of the smaller towns, given chiefly for their protection against the competition of the great departmental stores of Montreal, Toronto, and Winnipeg.

The determination of the actual amount of the rates was left to the Post Office department, with the proviso that they must be such as would make the service self-supporting.

The service was introduced in April 1914, with the following rates of charge:--

(_a_) Five cents for the first pound and 1 cent for each additional pound or fraction thereof, up to four pounds, and 2 cents for each subsequent pound up to eleven pounds within a radius of 20 miles from the place of mailing, irrespective of provincial boundaries.

(_b_) Ten cents for the first pound and 4 cents for each subsequent pound or fraction thereof, for all points in the province in which a parcel is posted, outside of the 20-mile radius.

(_c_) Ten cents for the first pound and 6 cents for each additional pound or fraction thereof, for all points outside the province in which a parcel is posted, and beyond the 20-mile radius, with an additional charge of 2 cents a pound for each province that has to be crossed to the destination of the parcel, not including the province in which it is to be delivered, up to a maximum of 12 cents a pound.[732]

An additional charge to meet the extra cost of transportation is made on parcels addressed to or posted at offices in certain outlying districts when the parcels have to be conveyed on stage routes over 100 miles in length.

Statistics of the number of parcels dealt with are not taken by the Canada Post Office.

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V. THE SUPPLEMENTAL SERVICES

In connection with the transmission of postal packets, other services, which are supplemental, and in some cases complementary, have been added, e.g. registration and insurance, in order that senders may protect themselves against loss or damage of packets in the post.[733] Closely allied to the transmission of ordinary letters is the transmission of money from place to place, and from early times the Post Office has also undertaken this function for appropriate fees. This is the money order and postal order business. These services apply only to a very small proportion of the total number of packets posted, and may in general be regarded as exceptional.[734]

In addition to these supplemental functions, the Post Office has usually been called upon to undertake services which have little or no relation to the transmission of letters from place to place. Thus, the British Post Office conducts a Savings Bank, undertakes the issue of certain local taxation licences (gun and dog licences, etc.) on behalf of the Inland Revenue Department and local authorities, pays Old Age Pensions, sells stamps on behalf of the National Health and Unemployment Insurance Commissioners, exhibits certain Government notices in the windows of post offices, and, in general, stands ready to perform any service to which, by reason of its ramifications reaching to the remotest part of the kingdom, it may be specially well adapted.[735] In many countries the Post Office has assumed the control of the telegraph or telephone systems, or both--this, of course, largely in consideration of the close affinity between the essential character of those services--transmission from place to place of information and intelligence--and the primary function of the Post Office; and in consideration of the tendency of those services, like the letter service, to develop on monopolistic lines.[736] In continental countries the Government control of the telegraphs has been regarded as a military necessity.[737] The assumption of these functions has no necessary relation to the rates charged for the transmission of packets, but the circumstances under which the services are conducted, whether at a profit or at a loss, may indirectly affect the rates.

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VI. POST OFFICE REVENUE

In England, Germany, and France the Post Office has, almost from the first, been a source of revenue to the State. What has happened has been that since the reform the Governments have been glad to take whatever net revenue a penny rate would yield, but, in general, they have not been prepared to raise that rate in order to obtain a greater revenue.[738] The only one of the five countries which does not make, and on principle does not wish to make, a revenue out of the Post Office is the United States of America.

The penny letter rate is not by any means as low as the cost of the service. It is, however, not a burdensome charge in any circumstances, and, although so much greater than the cost, represents in a large number of instances much less than the full measure of benefit which the provision of the service confers on the beneficiary. This is, of course, the ordinary case of the purchaser of a commodity securing a "consumer's surplus."[739] Rates which yield a profit of 50 per cent. (pp. 76 and 311) must, however, be admitted to contain some element of taxation. In France particularly the Post Office occupies a definite place in the fiscal system.[740] There is, however, considerable diversity of opinion among economists with regard to the theoretical character of this revenue. Indeed, the general classification of public revenues is itself not yet agreed upon.[741] Under any classification there is difficulty in assigning a place for the Post Office revenue. With the simplest and most fundamental division it has been regarded as falling under one or other heading, according to the notion of the writer, or in accordance with certain changes of conception based on variations in attendant circumstances.[742]

The difficulty of classification arises from the fact that of the total amount of the postage charges actually levied, only a portion can in any case be regarded as taxation. A person who purchases a commodity from the State, but in purchasing it is charged something more than its actual value, is not taxed to the extent of the whole of the amount which he is charged. There can be no taxation in that part of the amount for which he receives equivalent value in the commodity purchased. It is easy to say of the gross postal revenue that so much is tax (i.e. the net revenue), and so much is cost of service (i.e. the actual expenses), though it may not be easy to justify even this distinction;[743] but what principle is to be followed in determining whether a particular postage charge (e.g. the letter rate or the parcel rate), or any part of it, is taxation?

Taxes are reckoned according to the rate of charge. Thus, the income tax is 2s. 3d. in the pound on earned incomes; but approached in this way postage is not a tax. If the charge only covers the cost of the service, there can be no tax.[744] And when there is a surplus (above normal commercial profit) it cannot be argued that the whole charge becomes a tax. The solution seems to be that in such a case it is neither tax nor industrial price. It contains elements of both, and cannot be classed wholly under either.[745]

The differing analyses of Post Office revenue result largely from their being based on consideration of the balance-sheet of the Post Office, as indicating whether postal charges are to be regarded as taxes.[746] The character of postal charges should not, however, be determined by reference solely to the amount of the surplus revenue. The true classification rests on the conception that the character of public revenue (including Post Office revenue) varies with varying circumstances.[747]

The penny letter rate is a source of very considerable profit, and is therefore not a pure price. Nor can it be said that this penny rate, although it is the source of practically all the profit, is a pure tax. In the case of a large number of letters there is no surplus beyond the cost of the service, and often the cost is greater than the yield of the postage on the particular letters dealt with. In such cases the rate does not contain any element of tax. In other cases the proportion of surplus over cost which the rate yields is exceedingly large.[748] But in all cases it contains some element of remuneration for service rendered. That part of it which is appropriated to cover the cost of conducting the service is of the nature of a price for a service rendered. The remaining part (when found), after allowance has been made for the element of monopoly, is a tax.[749] But it does not exist in all cases. Three categories of letters are therefore found; and the letter rate in general may, according to the circumstances under which the service is rendered, be (1) of composite character, partly price and partly tax, (2) a pure price, (3) a mere fee.

The other rates (excepting for the moment the parcel rate) have all for some specific purpose of State been fixed at a lower level than the letter rate; but, for the most part, without any nice adjustment to the cost of service. Consequently these subsidiary rates are not prices, and do not contain any element of taxation.[750] They are, however, charges made to individuals in respect of certain services performed by the State, and fall, therefore, under the heading of fees.

The parcel rates in England and Germany may be put under the same heading. In both cases the service is conducted at a loss, and the charges cannot therefore be regarded as prices. In the United States and in Canada the law provides that the rates for parcels must in all cases be such as to yield a revenue sufficient to cover the cost of the service, and the presumption is therefore that in those countries the rates will partake of the nature of prices.[751]

Although there has been diversity of opinion regarding the nature of Post Office revenue, there has been remarkable unanimity as to the propriety of raising a net revenue for the State on the service for the transmission of letters. In the days of high rates and relatively high revenue it was not challenged.[752] Sir Rowland Hill's reform took away any sort of feeling that the revenue obtained from the Post Office lay as a burdensome tax, but the amount of surplus revenue was still so considerable that it could fairly be regarded as containing an element of tax.[753] It has, moreover, steadily increased, and its existence been made the justification for claims for further reductions of rate.[754]

The use of the Post Office for the purpose of taxation, that is, the refusal to give away in improvements of service, or by reduction of rates, the net surplus of revenue, is accepted by economists as justifiable[755] and the public acquiesces. The surplus is obtained with the minimum of sacrifice on the part of those who pay, and it would be difficult to discover a tax in substitution which would fall as lightly. Apart from the fact that rates higher than would be necessary for defraying the actual cost of the service must of necessity operate to some extent to the disadvantage of trade and commerce,[756] there is little to urge against the raising of revenue from the Post Office, especially as it is obtained from such popular charges as a penny and a halfpenny, which are well within the reach of the poorest. Payment is, moreover, in a large degree voluntary. The number of letters which a private individual must write, and cannot avoid writing, in the course of a year is very small. If he has anything of importance to write, he does not think a penny an excessive sum to pay for its transmission. If he has nothing to write, there is no law to compel him to pay postage. The profits of postage are, however, large; and the existence of the State monopoly, and the essentially fiscal character of the rates charged, should not be overlooked.[757]

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VII. GRAPHS

APPENDIX B

DOCUMENTS AND EXTRACTS ILLUSTRATING ASPECTS OF POSTAL HISTORY

(i) ANCIENT POSTS.

_Persia_ (_circa_ B. C. 500).

"In Darius's idea of government was included rapidity of communication. Regarding it as of the utmost importance that the orders of the Court should be speedily transmitted to the provincial Governors, and that their reports and those of the royal secretaries should be received without needless delay, he established along the lines of route already existing between the chief cities of the Empire, a number of post-houses, placed at regular intervals, according to the estimated capacity of a horse to gallop at his best speed without stopping. At each post-house were maintained, at the cost of the State, a number of couriers and several relays of horses. When a despatch was to be forwarded, it was taken to the first post-house along the route, where a courier received it, and immediately mounting on horseback, galloped with it to the next station. Here it was delivered to a new courier, who, mounted on a fresh horse, took it the next stage on its journey; and thus it passed from hand to hand till it reached its destination. According to Xenophon, the messengers travelled by night as well as by day; and the conveyance was so rapid that some even compared it to the flight of birds. Excellent inns or caravanserais were to be found at every station; bridges or ferries were established upon all the streams; guard-houses occurred here and there, and the whole route was kept secure from the brigands who infested the Empire. Ordinary travellers were glad to pursue so convenient a line of march; it does not appear, however, that they could obtain the use of post-horses, even when the Government was in no need of them.

"_Note._--It was not the distance a horse ridden gently could accomplish in the entire day, but the distance he could bear to be galloped once a day. From the account which Herodotus gives of the post-route between Sardis and Susa, we may gather that the Persians fixed this distance at about fourteen miles."--George Rawlinson, _The Five Great Monarchies of the Ancient Eastern World_, London, 1871, vol. iii. pp. 426-7.

_Roman Empire._

"The advantage of receiving the earliest intelligence, and of conveying their orders with celerity, induced the Emperors to establish throughout their extensive dominions the regular institution of posts. Houses were everywhere erected at the distance only of five or six miles; each of them was constantly provided with forty horses, and, by the help of these relays, it was easy to travel an hundred miles in a day along the Roman roads. The use of the posts was allowed to those who claimed it by an Imperial mandate; but though originally intended for the public service, it was sometimes indulged to the business or conveniency of private citizens (Pliny, though a favourite and a minister, made an apology for granting post-horses to his wife on the most urgent business)."--Edward Gibbon, _The History of the Decline and Fall of the Roman Empire_, London, ed. 1896, vol. i. p. 50.

_Arabia._

"The first traces of the Arabian postal arrangements date from about fifty years after the death of Mahomed. Calif Mdowija, who died in 679, is regarded as the founder of the Arabian posts. Kodama, a native of Bagdad, who died in 959, gives an account of the service in his work called _The Book of Taxes_. There were 930 postal stations on the six great highroads starting from Bagdad. At some stations there were relays of horses, but in Syria and Arabia the messengers rode on camels; and in Persia the letters were conveyed from station to station by messengers on foot. The postal service under the Califs was an independent branch of the administration, and in addition to the conveyance of despatches and travellers was added the supervision of all the authorities in outlying possessions. Of the two classes of superior postal officers, the _nowaqquium_ was the postmaster who received the postal packets and letters and attended to their conveyance, whereas the _farwaneqqyun_ was a kind of chief postmaster at the capital of a province, who controlled the work of the postmasters and made his own report on all the civil and military authorities to the central office in Bagdad. These reports were so valuable that Calif Abu Djafar Manssur is credited with the statement: 'My throne rests on four pillars, and my power on four men--a blameless kazi (judge), an energetic chief of police, an honest minister of finance, and a faithful postmaster who gives me reliable information on everything.' It has been said that the Roman _cursus publicus_, the _frumentarii_, the _agentes in rebus_, and the _curiosi_ served a similar purpose, but the Arabian arrangement was more systematic. In the Post Office of the Califs the letters and packets posted, as well as those received from other places, were entered in special lists, where their number and address had to be stated. This practice was observed in India till a few years ago, and it will thus be seen that the letter bill of the modern posts was in use already among the Egyptians in 270 B.C., and also among the Arabs. From the information that has been preserved, it is inferred that the Arabian posts did, to a certain extent, transmit private letters, but this was not done officially, and the couriers and postmasters conveyed such correspondence, along with the official despatches, on their own account."--I. G. J. Hamilton, _Outline of Postal History_, Calcutta, 1910, p. 4.

_Mexico_.

"Communication was maintained with the remotest parts of the country by means of couriers. Post-houses were established on the great roads, about two leagues distant from each other. The courier, bearing his despatches in the form of a hieroglyphical painting, ran with them to the first station, where they were taken by another messenger and carried forward to the next; and so on till they reached the capital. These couriers, trained from childhood, travelled with incredible swiftness--not four or five leagues an hour, as an old chronicler would make us believe, but with such speed that despatches were carried from one to two hundred miles a day. Fresh fish was frequently served at Montezuma's table in twenty-four hours from the time it had been taken in the Gulf of Mexico, two hundred miles from the capital. In this way intelligence of the movements of the royal armies was rapidly brought to Court; and the dress of the courier, denoting by its colour the nature of his tidings, spread joy or consternation in the towns through which he passed."--W. H. Prescott, _History of the Conquest of Mexico_, London, 1903, pp. 20, 21.

A similar system existed in Peru (W. H. Prescott, _History of the Conquest of Peru_, Philadelphia, 1874, vol. i. p. 69).

_China._

"From the city of Kanbulu[758] there are many roads leading to the different provinces, and upon each of these, that is to say, upon every great highroad, at the distance of twenty-five or thirty miles, accordingly as the towns happen to be situated, there are stations, with houses of accommodation for travellers, called _yamb_ or post-houses. These are large and handsome buildings, having several well-furnished apartments hung with silk, and provided with everything suitable to persons of rank. Even kings may be lodged at these stations in a becoming manner, as every article required may be obtained from the towns and strong places in the vicinity; and for some of them the Court makes regular provision. At each station four hundred good horses are kept in constant readiness, in order that all messengers going and coming upon the business of the grand khan, and all ambassadors, may have relays, and, leaving their jaded horses, be supplied with fresh ones.... When it is necessary that messengers should proceed with extraordinary despatch, as in the cases of giving information of disturbance in any part of the country, the rebellion of a chief or other important matter, they ride two hundred, or sometimes two hundred and fifty miles in the course of a day."--_Travels of Marco Polo the Venetian_, London, 1904, pp. 190 et seq.

(ii) _NUNCII_ AND _CURSORES_.

"The Royal _Nuncii et Cursores_ constituted a very important branch of the Royal Establishment, and the payments to them form a very large and important item in the Household and Wardrobe Accounts from the earliest period when those accounts exist.

"These Messengers were employed both in England and in foreign parts, and as well on affairs of State as what may be considered as the private and confidential business of the Crown and Royal Family and the individuals attached to or composing the Royal Court. These Messengers, so attached to the Court, became the foundation of the establishment, which about the time of Henry VIII, or somewhat earlier, assumed the form of the regular establishment of the Post; and the information connected with them is important, as showing that the institution was intimately connected with the person of the sovereign, and that, in the first instance, it was his convenience that was sought. Those servants who, by usage, were more particularly employed on State affairs, probably became those who are now specially termed the 'Queen's Messengers.'"--_Report from Secret Committee on the Post Office_ (_Commons_), 1844, Appx., p. 21.

(iii) WITHERINGS' SCHEME FOR THE REFORM OF THE POSTS, 1635.

A Proposition for setling of Staffets or pacquet posts betwixt London and all parts of his Maiesties dominions, for the carrying and recarrying of his subiects l[~r]es. The cleere proffitt whereof to goe towards the payment of the Postm^{rs} of y^{e} Roades of England, for w^{ch} his Ma^{tie} is now chardged w^{th} 3400_l._ p a[~n]m.